Posted
by
timothy
on Tuesday August 21, 2012 @10:32AM
from the cash-back-on-that-purchase? dept.

hypnosec writes "Charlie Shrem, co-founder of BitInstant LLC, has confirmed that a BitCoin-funded international debit/credit card should be available very soon. Giving a time frame of 6-8 weeks, Shrem said over an IRC chat session that the card will function like any other credit or debit card, and that it can be used at places where MasterCard is being accepted. Shrem has also said that the initial 1000-odd cards will be given for free and subsequent cards will carry a charge of around $10. Any transaction that is carried out through the card [will incur a] 1% BitCoin transfer fee on top of the $1.50 ATM withdrawal fee."

Let's try an analogy. Imagine if the way you received email from somebody was by giving them the password to your email account, and then they logged in and uploaded a message directly to your inbox. There would be no SMTP, just IMAP upload/download. Nobody sane would design email in such a way because it'd mean to receive a message from somebody you'd have to trust them to not read your mail, which is unrealistic. But that's exactly how credit cards work. To buy something you give out what is effectively a long password, anyone who has it can spend money as you.

Over time the credit card companies are trying to change this, by introducing things like Verified by VISA which lets your bank introduce an actual password or more, but deployment is extremely slow. Fundamentally the problem is banks and CC companies don't have any incentive to fix this for real because they don't pay for the fraud costs, merchants do and they then have to pass it on to back to buyers via increased prices.

Keeping your bitcoins at home in a wallet or on paper is more secure, but then you can't use them with interbanking products, like a fancy Bitinstant international debit card.

According to the info provided by Shrem, the cards balance will update after only one or two block confirmations, so you could transfer money from your laptop/phone/smart card/whatever and have it spendable on your card a very short time later. But yes, you're right, if you need to interface with the traditional banking system then you have to maintain a balance with some third party, that reliance on third parties is the very problem Bitcoin tries to solve. Don't like it - stay entirely within the P2P Bitcoin economy.

As for sites getting routinely hacked, yes, maintaining large sums of money on a server paints a big red target on your back. That's why I don't give my money to a third party I don't know anything about for safe keeping - it's not complicated. So far my losses from these sorts of hacks have been zero.